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Tuesday, November 13, 2018

Former Charity CEO Pleads Guilty To Multi-Million-Dollar Political Corruption Scheme

The former CEO of a charity headquartered in Springfield, Missouri has pleaded guilty to her role in a multi-million-dollar political corruption scheme that involved bribes and campaign contributions for elected public officials in Missouri and Arkansas, announced Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division and U.S. Attorney Tim Garrison of the Western District of Missouri.

Marilyn Luann Nolan, 68, of Springfield, pleaded guilty before U.S. Magistrate Judge David P. Rush on Friday, Nov. 9, to one count of conspiracy to embezzle and misapply the funds of a charitable organization that received federal funds.

By pleading guilty, Nolan admitted that she conspired with others from 2008 to June 30, 2017, to misapply millions of dollars of the charity’s funds for substantial, undisclosed payments to lobbying firms and political advocates, monetary and in-kind contributions to the campaigns of candidates for public office, and to bribe public officials. Nolan also admitted that she knew her co-conspirators defrauded the charity in order to enrich themselves, and her.

Nolan began working at Alternative Opportunities Inc., in 1992. In 2015, that company merged with Preferred Family Healthcare Inc., after which it continued to be known as Preferred Family Healthcare. Nolan was the chief executive officer and oversaw the charity’s lobbying and governmental affairs activities.

Preferred Family Healthcare and its subsidiaries provided a variety of services to individuals in Missouri, Arkansas, Kansas, Oklahoma and Illinois, including mental and behavioral health treatment and counseling, substance abuse treatment and counseling, employment assistance, aid to individuals with developmental disabilities and medical services.

Political Advocacy, Campaign Contributions, Fund-Raising Events

According to the plea agreement, Nolan and her conspirators caused the charity to misapply its funds to pay for political advocacy, including lobbying, that violated both IRS rules governing tax-exempt organizations, and federal laws and regulations governing recipients of federal grants and contracts. Nolan admitted that she directed and assisted her co-conspirators to direct millions of dollars to lobbyists, including Donald Andrew Jones and Milton Russell Cranford, who previously entered pleas of guilty to federal crimes in related cases. Nolan also directly lobbied legislators.

Under her plea agreement, Nolan also admitted that she and her conspirators:

Caused the charity to contribute financially to the campaigns of candidates for public office through “straw donors,” including the charity’s lobbyists, who were also reimbursed by way of invoices that were falsely described as “training” and “consulting” expenses;

Encouraged charity employees to contribute to candidates for public office and caused the charity to reimburse them for those contributions by providing funds falsely described as reimbursement for travel or other expenses the employees had not actually incurred; and

Caused the charity to provide in-kind contributions to the campaigns of candidates for public office, including in Missouri where they organized fundraisers for several candidates running for seats in the Missouri State Senate, Missouri House of Representatives, and the Greene County Commission and in Arkansas, where Nolan and her conspirators organized fundraisers (often at hotels or restaurants) for many candidates running for seats in the Arkansas State Senate and Arkansas House of Representatives.

Nolan also admitted as part of her plea to directing an employee to use the charity’s resources to arrange for catering, liquor, decorations, and other food connected to political fundraisers. This employee used a charity-issued corporate credit card for the purchases, with Nolan’s knowledge.

At all times relevant to Nolan’s plea, the charity was absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of, or in opposition to, any candidate for elective public office. Contributions to political campaign funds violated this prohibition, and could have resulted in denial or revocation of tax-exempt status and the imposition of certain excise taxes.

Bribery of Elected Public Officials

According to the plea agreement, Nolan and her conspirators misapplied some of the charity’s funds to bribe elected public officials in the following manners:

They gave things of value to numerous public officials, in exchange for their official actions benefitting the charity and themselves personally, including cash, travel and entertainment, premium tickets to sporting events, hotel accommodations, and use of the charity’s luxury/recreational real estate;

They hired public officials and the family members of public officials as charity employees; and

Nolan and the conspirators disguised bribes as contract payments for things such as consulting, training, and legal services.

The government believes the schemes Nolan pleaded guilty to totaled approximately $6 million. The parties reserved the right in the plea agreement to litigate the exact amount of that loss, for the purpose of computing the federal sentencing guidelines.

Charity Embezzlement

As part of her plea agreement, Nolan also admitted that over an approximately 12-year period from 2005 to 2017, certain charity executives embezzled millions of dollars from the charity, from which Nolan profited. Nolan admitted that although she did not know the full details of the many embezzlement and misapplication of funds schemes, she knew at the time that the charity bore additional costs from many of those transactions, and willfully blinded herself regarding the details of her conspirators’ schemes and artifices to defraud the charity.

One example referenced in Nolan’s plea agreement consisted of the formation of an LLC that was used as the management company for Alternative Opportunities, identified in court documents as Entity A. In 2006, Entity A was sold to a publicly-traded corporation identified in court documents as Company A, which was also partly owned by Nolan. Nolan admitted that this sale was perpetrated for the primary purpose of enriching charity executives, including herself. Nolan’s share of the proceeds from the sale of Entity A to Company A was $3,769,536.

Nolan further admitted as part of her plea that she also received $361,574 from two LLCs identified as Entity B and Entity C where, immediately prior to the 2006 sale of Entity A to Company A, Entity B acquired title to all real estate formerly held by Entity A and Entity C held the title to the corporation’s headquarters building in Springfield, and duplex homes located in Springfield.

Under the terms of Friday’s plea agreement, Nolan must pay $4,131,111 in restitution to the government, less a credit for taxes she paid on the funds received.

A sentencing hearing will be scheduled after the completion of a presentence investigation by the U.S. Probation Office.

The case was investigated by IRS Criminal Investigation, the FBI, and the Offices of the Inspectors General from the Departments of Justice, Labor, Veterans Affairs, and the Federal Deposit Insurance Corporation (FDIC). This is a combined investigation with the Western District of Arkansas, the Eastern District of Arkansas and the Public Integrity Section of the Department of Justice. This case is being prosecuted by Trial Attorney Marco A. Palmieri of the Public Integrity Section and Assistant U.S. Attorney Steven M. Mohlhenrichof the Western District of Missouri.